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I'm Not as Bad as Howie Kurtz Says

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From: James J. Cramer
To: Howard KurtzPosted Tuesday, Sept. 26, 2000, at 9:00 PM ET

In his new book The Fortune Tellers, media critic Howard Kurtz examines the brokerage analysts, fund managers, and news outlets who distribute the information that makes the financial markets rise and fall, and finds many of them conflict-ridden, irresponsible, and glib (click here for an excerpt). In this exchange, James Cramer defends himself and his peers from Kurtz's charges.

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If I'm such a hack, why do people pay me millions to run their money? If I am just another bogus fortuneteller, with an agenda to further my own wealth, what about the hundreds of millions of dollars I have made for others? Did I just get lucky? Is that how I beat the averages year after year after year? These are the thoughts that ran through my head after reading The Fortune Tellers, where Howard Kurtz tries to tell all about the manipulation and hype by the journalists that cover Wall Street. Kurtz's thesis, to put it bluntly, is that nobody knows anything about what is going to happen to stocks on Wall Street but everybody claims they do, particularly on television. As one of the principal subjects of the book, I bridle at such a suggestion and question whether Kurtz was watching as closely as he should have been when he sat in my office all of those times.

Kurtz is the media reporter at the Washington Post, a job which often makes him the "conflicts" reporter. Journalists are addicted to exposing conflicts, and they can make for good copy, particularly when it comes to politics, where people often seem to be taking money from the public under the guise of doing something for the public. Financial reporting is rife with conflicts, so I can see how Kurtz would want to get behind the scenes and expose them.

But, unlike politics, where the wrong decision gets made because of money, often the right decision gets made BECAUSE of the money. The conflicts, if disclosed, often work in favor of the investor.

For years the way financial journalism worked is that anonymous money-men told eager but unsophisticated reporters what to write. The result was a product of dubious worth. In the last decade, though, a new generation of tough reporters and editors, particularly of the TV genre, have insisted that the managers get out of the closet, say what they really like, disclose their holdings, and be held accountable for their positions. As someone who writes and discloses his positions every day, I am proud to be a part of that new genre. We are trying to raise the discourse and help people control their own finances by demystifying the process. Sometimes that means we admit we make mistakes. Sometimes that means we admit the market is too difficult to call. It always means that we admit there is no real science to this process.

At all times we are doing our best to make people realize there are plenty of charlatans out there and that you can handle your money better than just about anybody if you have the time and inclination. In fact, I started TheStreet.com with my friend and New Republic owner Marty Peretz five years ago precisely because we thought we could help people do better in the market. Judging by our 100,000 paid readers, and a page-view count—Web talk, I know—that continues to grow even as our stock price falters—we must be doing something right. Somehow, that whole effort gets turned upside down by Kurtz in The Fortune Tellers. The admission that we don't know, at all times, what to do, rather than suggesting that we are human, makes us seem like boobs who know nothing and pretend knowledge. Our putting our money where our mouth is and disclosing such just makes us into shills for our positions. And the journalists that are trying to hold people accountable? They get lumped in with the very people who are doing their best to hide their conflicts and hype their sources' stocks without any accountability at all. It's as if nothing has changed since the days when the Wall Street Journal's "Heard on the Street" columns was sold to broker thugs in advance so they could profit from it. How could Kurtz miss this obvious chasm between the good and bad guys? How could he fail to see that some people are genuinely aiding people in making money while others are obfuscating the public? Pretty simple: If you start from the point of view that journalism is objectively pure and can only be spoiled by conflicts, not by misleading information, you will reach the same conclusion every time: A wood stupid reporter who writes about the market and gets manipulated by his sources beats a pro who is telling it like it is any day of the week, even if he discloses, because, alas, the pro is corrupt and the journalist is pristine. I say save that kind of conclusion for the politicos. Money's too important to leave it to those who don't know. And we've made too much progress in the field of financial reporting to let it get sidetracked by one journalist's jaded romp through business journalism. It's a shame that all of the good efforts of people to improve the financial knowledge of individuals get tarred by the same conflicts brush that Kurtz wields in whatever endeavor he trains his guns on. Many of the reviews of Kurtz's book have focused, wrongly, on the notion that he's simply writing about boring, behind-the-scenes gossip of the people who report and make the business news. In fact, those sections of the book, far from being boring, make great reading and will open many eyes to the complexities of the characters involved. It's not the descriptions of the characters that I find lacking. It's the conclusions about them. Had Kurtz simply dropped the muckraking and instead focused totally on the personalities, the book would be more enjoyable. Sure it would have been less substantive in conclusion, but who cares if the conclusion's wrong?

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From: James J. Cramer
To: Howard KurtzPosted Tuesday, Sept. 26, 2000, at 9:00 PM ET

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James J. Cramer is president of Cramer Berkowitz, a $400 million hedge fund in New York, and a daily columnist for TheStreet.com, a financial Web site he co-founded. Howard Kurtz is the media reporter for the Washington Post and the author of The Fortune Tellers: Inside Wall Street's Game of Money, Media and Manipulation (click here for an excerpt and here to buy it). The author of three previous books, including the best seller Spin Cycle, Kurtz is also the host of CNN's Reliable Sources.

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Reader Comments from The Fray:

Cramer:
You are asking Kurtz to hit the sell-side harder when, in my view, your site, TheStreet.com, goes pretty easy on them. I'm aware that your writers want to make a specific point, but I don't think they should sacrifice facts to achieve that aim. Recently, one of your writers wrote about Blodget's internet sector downgrade and wrote that he was using the Neutral rating for the first time. That was untrue, but it made the downgrade sound like a bigger deal. In the past, I have been interviewed by your writers and provided background analysis of Merrill Lynch research calls. Re: the DCLK example in the book, you could have called Blodget to the mat if you had asked him why he was recommending internet stocks on which his price targets suggested negative returns.

Kurtz:
What's the big deal with ETYS? You are not providing the whole picture. Blodget recommended ETYS at a report price of $37.50 and with a 12-18 month price target of $50 (33% upside) and a near-term Accumulate/long-term Buy rating. Based on typical ML research guidelines, those specs would make the stock eligible for a downgrade at a price as low as $41.67. (The minimum appreciation threshold for a ML Buy rating is 20%.) ETYS actually went up more than 100% from $37.50. The problem was that when ETYS was trading in the $50s, $60s, and $70s, Blodget continued to recommend purchase even though he wouldn't raise the price target from $50. Even more puzzling is that ML let him continue to recommend it. If ML had enforced its own typical guidelines, ETYS would have been downgraded and you would have had to select among 20 or so other similarly bad performing stocks to highlight. By the way, in your book, you say that Blodget downgraded Amazon from Buy to long-term Accumulate. That is wrong. It was from Buy to Accumulate, both near-term (or in official ML language, intermediate-term).

--Bob Kim

(To reply, click here.)

Having read just the excerpt of The Fortune Tellers online, I have to admit that it looks like Cramer has a point. Howard Kurtz is probably right in general where insisting that someone trying to divine the vicissitudes of stock market aggregates or of the individual issues which comprise the aggregates from moment to moment is, more often than not, someone fumbling around in a blizzard--a raging storm of impossible-to-gauge elements which admit of very little visibility alone or in their concatenation.

But surely the more interesting story concerns not the impact of these "fortune tellers" or the conflicts and challenges they pose to market regulatory institutions but the personalities of the actors who have promoted themselves to a standing where pure visibility may equal or be confused with what power and elements drive markets in reality. Cramer is more interesting--and, not incidentally, more revealed--in his own words than he is in Kurtz's depiction.

--Mark S. Devenow

(To reply, click here.)

(9/28)

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